Carole James refuses to budge amid renewed debate on speculation tax

News that nearly two-thirds of homeowners subject to B.C.’s new speculation tax will be British Columbians has sparked a fresh debate about the fairness and consequences of taxing assets and investments in a housing crisis.

Finance Minister Carole James didn’t budge Thursday when asked if the tax is, in fact, unintentionally going to impact mainly British Columbians with multiple homes rather than foreign owners who do not pay local income taxes. On Wednesday, James said about 20,000 of the 32,000 homes subject to the new tax are owned by British Columbians.

“In fact, if you take a look at the speculation tax, as I have said from the start, 99 per cent of British Columbians will not pay the speculation tax,” James told reporters in Victoria Thursday.

“One per cent who have second or third or fourth homes that they own in regions that we have targeted (as being) the least affordable, will pay the speculation tax if they choose not to rent their place out,” she said.

“We are in a housing crisis. You take a look at zero vacancy rates in Victoria, an almost zero vacancy rate in Kelowna. If you look at the affordability index in these communities, they are the least affordable places in all of British Columbia.”

Asked if housing measures such as the speculation tax were drawing resentment and dividing society, James said: “I think there are all kinds of British Columbians, middle class, high income, low income, who know that we have to address this issue. When you talk to owners of tech companies, for example, in B.C. who have said they can’t recruit talent because they take a look at the real estate page and decide they can’t be here. This is a crisis for our economy for all British Columbians and we all have to contribute to be able to address it.”

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B.C. residents will pay a speculation tax rate of 0.5 per cent, compared to one per cent for Canadian owners and two per cent for non-Canadian owners. For a B.C. resident owner of a $1 million second property that is left empty in a region targeted for unaffordable housing, the speculation tax owed would be $5,000 a year.

There will be a tax credit available for B.C. residents who own and leave empty their second homes valued under $400,000.

A group called Canadians Against the B.C. Speculation Tax is looking to crowdsource funds for a public advocacy campaign to pressure the government to withdraw the tax. It argues the tax will do little to reduce speculation and that it unfairly hurts British Columbians who own a second home, including those who have inherited or owned those homes for decades.

However, Graeme Egan, president of Vancouver-based CastleBay Wealth Management, said the speculation tax rate of 0.5 per cent for B.C. owners of second homes “is the cost of playing in that field as an investment,” in the same way that other stores of wealth yield capital gains and dividend taxes.

“We’ve got clients with second homes that are rental properties. One reason to have a second home as an investment is to diversify a portfolio with real estate as an asset class,” said Egan.

Egan said that in most such cases, the property is rented out, which would exempt the owner from the new tax.

Owners of a second home that isn’t rented out have it “as a thing to use. It’s an asset, but a lifestyle thing, something that the family benefits from having, a place to be together,” said Egan. “Whether you borrow or buy one of these (properties outright), this tax won’t have much impact. You are pretty well off to be able to do this, especially in Vancouver.”

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